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| A booming Chinese metropolis. |
Wednesday, October 16, 2013
Where is China headed?
A&R have asserted that the success of a nation comes from the correct combination of institutions both political and economic. The idea has been that these institutions must be inclusive in order to sustain long-term growth. The former Soviet Union served as an example of what was for a time thought to be an incredibly powerful combination of state power and economic extraction leading to massive growth. However, we learned that the growth created by these institutions can only be temporary and inevitably leads to collapse.
China's state run economy, political inequality, and extractive economics has lead to remarkable growth in recent years, but it may slowing. In the next ten or so years we can hope to see whether China falls victim to their institutions, or redefines where sustained national progress can come from.
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Actually, the new president of China, Xi Jinping, has been taking a series of actions to prevent China's structure from going further extractive. First, he has enforced several policies against the pervasive corruption in China. He had some of the identified officials caught and put Bo Xilai, a celebrated politician with an elite family background and a huge amount of wealth into jail. By showing that no misbehaves will be trivialized this time, Xi Jinping successfully got the Chinese officials intimidated and contained the further growth of their power. Second, Xi has announced a new land reform to reduce China’s state-run economic and the power of some governors and opened it up for the people. Also, Xi has quickly embraced the idea of economic reform and even seemed to hint at some loosening of China’s one-party system. From his actions, we see a hope for institutional change. However, considering the resistance in China’s elite class, to know whether these will really make a difference or not, we will just have to wait and see.
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